Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.21.2
Fair Value Measurements
9 Months Ended
Sep. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Note 11—Fair Value Measurements
The Company follows the guidance in ASC 820 for its financial assets and liabilities that arere-measured and reported at fair value at each reporting period, and
non-financial
assets and liabilities that are
re-measured
and reported at fair value at least annually. Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
 
   
Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
 
   
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
 
   
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. The Company’s portfolio of investments held in the Trust Account is comprised mainly of investments in U.S. government securities with an original maturity of 185 days or less. The fair value for trading securities is determined using quoted market prices in active markets.
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Description    Quoted
 
Prices
 
in
Active Markets
(Level 1)
     Significant Other
Observable Inputs
(Level 2)
     Significant Other
Unobservable Inputs
(Level 3)
 
                      
As of September 30, 2021:
                          
Assets:
                          
Investments held in Trust Account - U.S Treasury Securities Money Market Fund
   $  402,518,127      $ —        $ —    
Liabilities
                          
Derivative warrant liabilities - Public
   $ 17,307,500      $ —        $ —    
Derivative warrant liabilities - Private
            $  8,643,000           
Other derivative instruments
   $ —        $ —        $  5,048,594  
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2020 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
                         
Description
   Quoted Prices in
Active Markets
(Level 1)
     Significant Other
Observable Inputs
(Level 2)
     Significant Other
Unobservable Inputs
(Level 3)
 
                      
Assets:
                          
Investments held in Trust Account – U.S. Treasury
                          
Securities Money Market Fund
   $ 402,500,000      $ —        $ —    
Liabilities:
                          
Derivative warrant liabilities – Public
   $ —        $ —        $ 19,588,333  
Derivative warrant liabilities – Private
   $ —        $ —        $ 9,782,000  
Transfers to/from Levels 1, 2, and 3 are recognized at the end of the reporting period. The Public Warrants began to trade on January 11, 2021, and were moved from Level 3 to Level 1. The Private Warrants do not trade; however, as of the commencement of trading of the Public Warrants, the price of the Public Warrants has been used to determine the valuation of the Private Warrants, which moved from Level 3 to Level 2. The Public Warrants and the Private Warrants have substantially similar terms.
Level 1 instruments further include investments in money market funds and U.S. Treasury securities. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
Derivative Warrant Liabilities
The warrants are accounted for as liabilities in accordance with ASC
815-40
and are presented within derivative warrant liabilities on the Company’s balance sheet. The derivative warrant liabilities are measured at fair value at inception and on a recurring basis, with any subsequent changes in fair value presented within change in fair value of derivative warrant liabilities in the Company’s statement of operations.
The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants were measured at fair value using a Monte Carlo simulation model both at issuance and as of December 31, 2020. The Public Warrants began to trade on January 11, 2021; subsequently, the Public Warrants have been measured at their trading price and the Private Warrants have been measured with respect to the Public Warrants. The Company recognized gains and losses in the statement of operations resulting from changes in the fair value of warrant liabilities of ($5.0
million) for the three months ended September 30, 2021. For the nine months ended September 30, 2021, the Company recognized a gain to the statement of operations resulting from a decrease in the fair value of liabilities of approximately
$3.4 
million on the accompanying unaudited condensed statement of operations.
Prior to the separation and trading of the Public Warrants, the estimated fair values of both the Public Warrants and the Private Placement Warrants were determined using Level 3 inputs. Inherent in a Monte Carlo simulation are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its ordinary shares based on implied volatility from historical volatility of select peer company’s ordinary shares that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury
zero-coupon
yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
The following table provides quantitative information regarding Level 3 fair value measurements for warrants as of December 31, 2020:
         
Share price
   $ 9.79  
Exercise price
   $  11.50  
Risk-free interest rate
     0.69
Volatility
     23.0
Expected term (years)
     5.0  
Dividend yield
     0.0
Warrants are measured at fair value on a recurring basis. The Public Warrants began trading on January 11, 2021, and quoted market prices were used for the Level 1 fair value measurement of the Public Warrants as of September 30, 2021. The Private Warrants are not publicly traded. The subsequent measurement of the Public Warrants as of September 30, 2021 is classified as Level 1 due to the use of an observable market quote in an active market. As the transfer of Private Placement Warrants to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the company determined that the fair value of each Private Placement Warrant is equivalent to that of each public warrant. As such, the Private Placement Warrants are classified as Level 2.
The following table presents a roll-forward of the fair value of Level 3 (significant unobservable inputs) warrant liabilities for the nine months ended September 30, 2021:
                         
     Public
Warrant
Liabilities
     Private
Warrant
Liabilities
     Total Warrant
Liabilities
 
                      
Beginning balance at December 31, 2020
   $ 19,588,333      $ 9,782,000      $ 29,370,333  
Change in fair value
     (2,280,833      (1,139,000      (3,419,833
Transfers out of Level 3 during nine months ended September 30, 2021
     (17,307,500      (8,643,000      (25,950,500
Ending balance as of September 30, 2021
   $ —        $ —        $ —    
Forward Currency Contract
The Deal-Contingent Forward is accounted for as a derivative in accordance with ASC 815 and is presented within other derivative instruments on the Company’s balance sheet. The forward currency contract is measured at fair value at inception and on a recurring basis, with any subsequent changes in fair value presented within change in fair value of other derivative instruments in the Company’s statement of operations. For the three and nine months ended September 30, 2021 the Company recognized a loss to the statement of operations resulting from a decrease in the fair value of the forward currency contract of approximately $5.0 million presented as change in fair value of other derivative instruments on the accompanying unaudited condensed statement of operations.
The estimated fair value of the Deal-Contingent Forward as of September 30, 2021 was determined using an income approach that incorporates significant unobservable inputs. The expected Business Combination close date is based on the expected effective date of the Business Combination. The probability of Business Combination close prior to April 19, 2022, which represents the date that the Deal-Contingent Forward will expire unsettled, is estimated with consideration given to a number of factors that impact the Company’s ability to effect the Business Combination, including the fact that public shareholders have the ability to redeem their shares for cash and thereby reduce the amount of cash available to fund the Business Combination. The risk-free interest rate is based on the U.S. Treasury
zero-coupon
yield curve as of September 30, 2021 for a maturity similar to the expected remaining term to the Business Combination closing date. The Euro (“EUR”) to US Dollar (“USD”) forward exchange rate is determined using the EUR to
USD
forward foreign exchange curve as of September 30, 2021. Counterparty credit risk is assessed based on the strong credit standing of the counterparty as well as the short-term nature of the forward contract. The following table provides quantitative information
regarding
Level 3 fair value measurement for the Deal-Contingent Forward as of September 30, 2021:
 
Expected Business Combination closing date
    
December 31, 2021
 
Probability of Business Combination close prior to April 19, 2022
     70
Risk-free interest rate
     0.056
EUR to USD forward exchange rate
     1.1954  
Counterparty credit risk
     De minimis  
The following table presents a roll-forward of the fair value of Level 3 (significant unobservable inputs) forward currency contract liabi
lities
for the nine months ended September 30, 2021:
 
     Other Derivative instruments
(Level 3)
 
        
Beginning balance at December 31, 2020
   $ —    
Change in fair value
     5,048,594  
Transfers out of Level 3 during nine months ended September 30, 2021
     —    
Ending balance as of September 30, 2021
   $  5,048,594